Can a Carrier Issue a Renewal and Still Non-Renew the Policy?
Question from an IIABNY member: “The carrier set up a policy for non-renewal, issued the renewal, then told us that the non-renewal will stand. They said it was a system error that generated the renewal, and the legal notice was issued within the required 45 days so the notice will stand. Is this correct, or is the company obligated to stay on the policy since they issued a renewal (which the insured received)?”
Answer: Since you mentioned that the carrier issued the non-renewal notice more than 45 days prior to expiration, I assume that this is a personal lines policy (New York law requires carriers to issue non-renewal notices 45 to 60 days in advance of a personal lines policy expiration). I didn’t find a definitive answer regarding personal lines, but a New York Insurance Department advisory legal opinion dated Nov. 13, 2002, appears to address the principle. It addresses a situation where an insurer sent two notices regarding a commercial general liability policy– one stating that the insurer intended to non-renew the policy and the other stating that the insurer would renew it with a premium increase greater than 10 percent. The attorney for the department wrote:
The insurer failed to properly inform the insured as to what action the insurer intended. The insurer cannot both renew and non-renew or conditionally renew and non-renew a policy. The notice provisions and statutes must be literally complied with, and any ambiguities in language are construed against the insurer… Therefore, the notice is ineffective to non-renew or conditionally renew the policy.
The attorney relied on New York Insurance Law Section 3426, which governs commercial lines. However, Section 3425, which governs personal lines, does not include any provisions that contradict the principle the attorney cited in this opinion. Therefore, I believe an insurer’s failure “to properly inform the insured as to what action the insurer intended” is just as problematic in your situation as it was for the one described in the opinion. Issuing a non-renewal notice and a renewal policy at the same time is confusing to any reasonable person. In my opinion, this is not a valid non-renewal; I suspect the Insurance Department would see it that way if the insured were to file a complaint.
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